Earnings call transcript: Profoto Holding AB reports Q2 2025 sales decline

Profoto Holding AB reported a challenging second quarter of 2025, with net sales declining by 13% to 171 million Swedish crowns. The company’s stock price reflected investor concerns, dropping 8.68% in pre-market trading, continuing a significant decline that has seen shares fall over 57% in the past year. According to InvestingPro analysis, the stock is currently trading near its 52-week low and appears undervalued based on Fair Value calculations. This decline was attributed to both organic growth challenges and unfavorable currency effects. Despite these setbacks, Profoto remains optimistic about future market improvements and the impact of cost reduction initiatives expected in the latter half of the year.

Key Takeaways

• Net sales fell 13% to 171 million Swedish crowns.
• The stock price dropped 8.68% in pre-market trading.
• Cost reduction program aims for a 20% total cost base reduction.
• New product launches target expanded market segments.
• The company remains cautious yet hopeful about market recovery.

Company Performance

Profoto Holding AB experienced a significant decline in net sales during the second quarter, with half of the 13% drop attributed to organic growth issues and the other half to currency fluctuations. The company’s earnings before interest and taxes (EBIT) also fell to 18 million Swedish crowns, resulting in an EBIT/sales ratio of 11%. Despite these challenges, InvestingPro data shows the company maintains impressive gross profit margins of 84.94% and trades at a P/E ratio of 10.27. The weak performance of the studio business segment further impacted the gross margin. For deeper insights into Profoto’s financial health and more exclusive ProTips, consider accessing the comprehensive Pro Research Report available on InvestingPro.

Financial Highlights

• Revenue: 171 million Swedish crowns, down 13% year-over-year.
• EBIT: 18 million Swedish crowns, reflecting pressure on profitability.
• EBIT/sales ratio: 11%, indicating tight margins.
• Gross margin affected by challenges in the studio business segment.

Outlook & Guidance

Profoto is implementing a cost reduction program targeting a 20% reduction in the total cost base, with full effects anticipated in Q4 2025. The company is also focusing on expanding its product range to capture a broader market, particularly in the LED segment for film and e-commerce production. InvestingPro analysis indicates the company operates with a moderate level of debt, with a debt-to-equity ratio of 0.69, providing financial flexibility for these strategic initiatives. Additional ProTips and detailed financial metrics are available to InvestingPro subscribers. Despite current market challenges, Profoto remains cautiously optimistic about improvements in the second half of the year.

Executive Commentary

CEO Anders Hiedebarg acknowledged the tough market conditions, stating, "We are in a tough content creator market." He expressed optimism about future prospects, saying, "We are ready for better times ahead." Acting CFO Linus Marmstadt emphasized the company’s control over its expenses, noting, "We are in full control of our cost base."

Risks and Challenges

• Market saturation in the still photography sector.
• Potential impact of US tariff changes on operations.
• Competitive pressure from lower-cost alternatives in the LED market.
• Currency fluctuations affecting financial performance.
• Uncertainty in the content creator market impacting demand.

Q&A

During the earnings call, analysts inquired about the effects of the product mix on financial results and sought clarification on the timing of product launch impacts. The company addressed concerns about market hesitancy and the potential for customer downgrading, emphasizing their strategic initiatives to navigate these challenges.

Full transcript - Profoto Holding AB (PRFO) Q2 2025:

Amanda Ostrom, Head of Investor Relations: My name is Amanda Ostrom, and I am Head of Investor Relations. Today, I have with me our CEO, Anders Hiedebarg and our acting CFO, Linus Marmstadt. We’ll start off by handing over to Anders, who will give you some highlights for the quarter.

Anders Hiedebarg, CEO: Good morning, and hello, everyone. Today, we are reporting the second quarter twenty twenty five, and, we are reporting from a challenging content creator market. Our net sales decreased with 13% down to 171,000,000 Swedish crowns, And half of that was organic negative growth, and half of it was explained by currency effects, mainly a lower dollar and Swedish crown exchange rate. As I said, the market is tough, and and we see that the customers are hesitating to take decisions to buy make big decisions to buy. And this has also affected our EBIT, which is down to 18,000,000 Swedish crown and 11% EBIT over sales ratio.

Of course, this is explained by the lower sales, but it’s also explained by product mix and and somewhat increased cost for launch of our new LED products, and I will cover that more later in the presentation. We launched though a lot of new products. First of all, we launched the the b 20 and b 30, which are two new flash products, and we also launched and renewed our line of LED products. More of that later. One of the other things that is, of course, affecting everything is the development regarding tariffs into The United States, and and we are working heavily with that and and following the situation closely.

So sales decline of 13%, and that looks dramatic. But as I said, half of that is currency effects and half of it is organic growth. And if you look into regions, we first see The Americas, which is not showing a decline, but mainly in in local currencies. So the organic growth was slightly up, but giving the currency effects, we are not down 9%. We are also seeing a decline both in organic and currency effects in in Europe as well as in Asia Pacific.

The the the downsize of organic growth is though explained of that we have very good product launches in the core this quarter this year, but we have eve actually even better product launches last year in the same quarter. Last year, we launched the Pro b three, and this year, we launched the b 20 and the b 30 products. And but I would like to explain also what we have done into the LED product market. We launched at the Cinegear Expo in the June. We launched our full line of LED products, the l p 2,000 c, which is a large panel used especially in cinema production.

The l 16 600 color and the daylight versions, which are used both in cinema but also in the content creator market. The the initial reaction was very good, especially to our large panel because we were at Synagear and the interest was huge for for that kind of product. But we have not started to ship yet, so we’re taking costs for launching the products, but we have not started to ship yet. We expect to get the production going so that we will start shipments towards the end of the year during q four. So we hope to see figures for that in in the fourth quarter.

In addition to the LED launches, we also launched the b 20 and the b 30, which is a replacement of the b 10, and the the the reaction from the market was very good. So now over the last twelve months, we have updated our flash product line. So we have a brand new, a very great products selling into the photography market. We also have a good very good lineup for professional products into the LED market, both to the cinema market as well as to the content creator market. And this results in that we have the possibility to to approach a greater addressable market.

And we see that the addressable market is increasing with three, four times from the 3 and a half billion to $14.15 mil billion Swedish crowns. We see that the flash market is rather flat, and it is not increasing. And we can see that the content creator market, especially for still photography, is is flat. However, we also have now products, especially for the film and cinema markets, which the all our products are are positioned towards that market, as well as to the dealers and large studios and content creator economy market. We see that large still photography studios are investing in not only in flash, but also a lot into LED for shooting small, shorter films to be used in in both ecommerce, but also for for driving sales of of different brands.

And that market is actually very attractive at the moment. So thank you very much. I will leave the word to you, Linus.

Linus Marmstadt, Acting CFO: Okay. Thank you, Anders. And as Anders mentioned, I mean, we see no major changes in the underlying sentiment. The customers are still a little bit affected by the cautious market environment, And this means that we actually see them decline in the the top line of 13%, of which half is explained by currency effects. And also the the strong launch last year compared to to this year in terms of the the the series this year.

And I think in as I mean, it looks really dramatic when you say the sharp drop of 50% in the EBIT, and that is, of course, partly explained by the sales decline, but also the product mix. But also there is an accounting effect as we now start to not decrease, but we’re not capitalized as much as we have done in the past given the current r and d portfolio and where we are. And I will revert to that a little bit later. So all in all, it is a disappointed result, but we are taking actions. And we are seeing the first sign of our earlier communicated cost reduction program.

So we see not the full effect yet, but we start to see the signs of it. And the next slide is not really my favorite slide. As you see, it’s a declining trend. And I mean, it is a tough market, and it has been for quite a while. But we are really acting hard to increase and improve the top line, but also, as I mentioned, the cost side of it.

So we are really motivated and have a clear target to really reverse this negative trend. And this is I mean, it’s we communicated that we launched a cost reduction program earlier this year, and now we’re starting to see the effects. And during the quarter, we haven’t really seen it on the personnel expenses yet. That is about to come during the second half of the year. But as you can see, the we have run a very tight cost shift during the quarter and especially on the other external expenses.

So during the quarter compared to last year, we actually saw a decline of 15%. So we are on track to reduce the total cost base with 20%, and we will see the full effect in the fourth quarter of this year. So that’s positive and that we really have full control of our cost. And that this is also despite the fact, as Anders mentioned, that we actually had some cost related to the the major launches during the quarter. So despite that we continue to invest in new launches, we see that the total cost base actually to decline.

And this is the R and D portfolio in in terms of the ratio compared to sales. And I I think we have stated it for for a couple of quarter that now we have a really solid product portfolio. So we can reduce the the r and d spend both in absolute terms, but also in relation to to sales. So we are on target to reach the 10% of of sales, And that will be, you said, the full effect during the fourth quarter as this is mainly driven by reduction in personnel, which takes a few quarter to have the full impact on. And, of course, we hope to see the signs of improved sales during the the, yeah, the second half of the of the of the fall.

So that hopefully will help us to reach the target. But we are full control of our cost base, so we will achieve it anyway. That’s basically it from my end. Over to you, Anders.

Anders Hiedebarg, CEO: Thank you, Linus. So let me summarize. Yes. We are in a tough content creator market. It is, it is challenging at the moment, and this has an effect of the q two sales and and the sales development.

However, we have a great product lineup, in flash. We have a great product lineup coming into LED, and we have, as Selino said, reduced our cost base. So we are ready for for better times ahead. But, however, this will have a effect towards the end of the year, so it will take a while before this happens. And we are also affected by the uncertainty of the tariffs, but we are following that closely and adapting accordingly, to to the new market or the tariff situation.

So we are hoping for better times ahead. Thank you very much. Over to you, Amanda, for taking questions.

Moderator: The next question comes from Jakob Soderblom from Carnegie Investment Bank. Please go ahead.

Jakob Soderblom, Analyst, Carnegie Investment Bank: Hello, and good morning. I just wanted to ask if you can expand a bit more on the product mix development.

Anders Hiedebarg, CEO: Jacob, it’s very hard to hear what you’re saying. So could you please repeat? Perhaps

Jakob Soderblom, Analyst, Carnegie Investment Bank: you can hear me a bit better now. Is this better?

Anders Hiedebarg, CEO: Thank you.

Jakob Soderblom, Analyst, Carnegie Investment Bank: Okay, perfect. Sorry for that. Now I’m just wondering a bit about the gross margin development, the product mix that you’re talking about. Could you expand just a bit what are the different what is the mix effects here that we’re looking at? What does this entail then for the later part of the year as well?

Anders Hiedebarg, CEO: Linus, would you like to cover that?

Linus Marmstadt, Acting CFO: Start I mean, on a on a general on a group level, we continue to have this the gross margin target that we have, but we see, of course, some differences in various segments or product categories. So we actually saw somewhat weak development in our studio business, which has, yeah, fairly good mark margins. And so when the product mix are shifting, and that’s we see actually a smaller effect on on that from a product mix perspective. So it’s not the major changes, but there are. If you have a very strong development in one segment with higher margin than the group level and strong margins in some categories that are on a group level target, you see the mathematical effect on that.

Jakob Soderblom, Analyst, Carnegie Investment Bank: Okay. And that’s now let’s talk then on the studio business. You expect the current sentiment we gave to persist throughout the year then, I’m guessing, given the comments in this call?

Linus Marmstadt, Acting CFO: Yes. But there are also some tariff elements in the second quarter, which actually has affected the COGS. So the we don’t really see the current level as our long term target. I mean, we still are working on the target that we have.

Jakob Soderblom, Analyst, Carnegie Investment Bank: Perfect. Thank you for that answer. Then another question then, please, on cash flow. I see that the receivables are up quite a bit. And I mean, you are in a launching period here where you have somewhat of a mismatch, I’m guessing, then in revenue and cost for these launches.

Is it purely timing that is going to swing back then in subsequent quarters? Or is it anything else?

Linus Marmstadt, Acting CFO: It’s more of a yes, I mean, as we have a number of important product launches, of course, the inventory and accounts receivable will increase temporarily, but it’s no major changes. It’s more a timing effect.

Jakob Soderblom, Analyst, Carnegie Investment Bank: Just a final one from my end then. I’m guessing if you could talk somewhat a little bit. I mean, when you present the Q1 numbers, kind of a similar commentary in my view, as you’re presenting here during the call. Is it possible to give any type of information on this, how this has developed? And I’m guessing coming from April with the tariff announcements and so on and now moving into the beginning of Q3, do you see any type of, what you call it, more underlying comments that you’re hearing from your distributors and so on in terms of market sentiment and changes?

Or has it been a rather flat development, if you can call it like that month over month in Q2 and now going into July?

Anders Hiedebarg, CEO: No. But, I can take that. But it it is rather flat. We, we see, no major overall from distributors and dealers and customers that it’s changing up. People are still very hesitant and also cost not only ourselves and our distributors and dealers are also following, especially in The US, what is happening the changing market and tariffs, and that is putting a wet blanket over decisions.

So but it is not changing to it is it is the same level of uncertainty or slow demand in the in our market, which which we call the content creator market. So it is generally the same feeling as we had in the beginning of the year. So we see no shift is neither up nor down.

Moderator: The next question comes from Marcella Klang from Handelsbanken. Please go ahead.

Marcella Klang, Analyst, Handelsbanken: Thank you and good morning. A couple of questions from my side as well. During this quarter, you made quite a hefty reduction in your workforce. You mentioned 15%. And still, you did not report any extraordinary costs, no adjustments to your earnings.

Have you been able to and also you mentioned cost for trade fairs, marketing events, while you have launched five products in the past twelve months compared to usually two, three. So there is a lot happening in the company and still you’re not reporting any kind of extraordinary costs. Is it by choice that you don’t view this as extraordinary? Or what was your reasoning behind this to take everything to the CNO like that?

Linus Marmstadt, Acting CFO: Yeah. If I if I start comment I mean, on the on the event side, we see it more as a ordinary course of business. So we don’t want to have any one off effect and to to make a number of adjustments related to to that because, I mean, that we are a little bit conservative there. And in terms of the severance payments and one off cost relation to reductions, we have a policy that people are working to the to the final end so to to say. So you’re actually not allowed to take any one offs there.

So they they work throughout the the notice period.

Marcella Klang, Analyst, Handelsbanken: And do you need to pay any kind of extraordinary severance packages, or are you able to terminate the contract without extra costs for the company?

Linus Marmstadt, Acting CFO: On an overall general comment, it’s very low amounts. So that we don’t say that scenarios and so actually have it as a one off cost. It’s a part of the daily operation. So yes.

Marcella Klang, Analyst, Handelsbanken: Understood. And then you mentioned around SEK 30,000,000 effect on EBIT once these cost cuts are fully visible by the end of the quarter, which is around SEK 8,000,000 per quarter, if you just divide it by four. Is that enough to bring you up to your you still have your margin target, EBIT margin 25% up to 30 Or will you need to do more in terms of cost savings?

Linus Marmstadt, Acting CFO: The short answer is actually that we are running the cost reduction according to plan. And we are based on that, we are able to reach the targets.

Marcella Klang, Analyst, Handelsbanken: And then you mentioned the Pro D3 that gave very strong second quarter last year. Obviously, third quarter last year was weaker. So do you expect any kind of effect that we should take into account tough comparables also in the third quarter or third quarter last year is more without any extraordinary effects boosted by launches at this time?

Linus Marmstadt, Acting CFO: Will you take that one, Anders?

Anders Hiedebarg, CEO: No. But the third I didn’t really understand the question. But the third quarter is by the seasonality is normally a weaker quarter since we have the vacation period in many countries in August and also July. So this is the summer period, and it is normally much slower as what you saw last year.

Amanda Ostrom, Head of Investor Relations: And just to answer your question, Marciela, no, we did not have anything extraordinary last year in the third quarter.

Marcella Klang, Analyst, Handelsbanken: And then maybe a follow-up question. The latest launches B20 and B30, what do you mean by very good initial reaction? Is it sales? Is it preorders? Is it reviews?

Anders Hiedebarg, CEO: No. It is it is sales so that we are have sold into more into both into dealers and the sell through through dealers to end to customers. It is some countries, it is as expected and and and and other countries better than expected. So we are it was a good launch.

Marcella Klang, Analyst, Handelsbanken: And do you expect expected from that also in the coming quarter or two?

Anders Hiedebarg, CEO: No. So I can’t say. And we’re talking about the second quarter now and the the third quarter. We we will know in the end of when we summarize in the September, beginning October where we added. So but normally, we have, as you know, as we communicated earlier, that we have a good sell in into the market and that affects the the figure.

So it helped the figures in in second quarter. It would have looked we would have sold less if we hadn’t launched. So the launch was good, but the market is is not is it’s a wet blanket over the market, over the content creative market, and that’s why we’re not seeing figures overall increasing, and we have this tough comparison in in last year.

Marcella Klang, Analyst, Handelsbanken: Then maybe a question that I I I guess I asked this before. When you have a successful product launch, do you usually have an effect that quarter? Like half of the sales are down that quarter or less than half? How long is the way of increased sales from a particular product usually?

Anders Hiedebarg, CEO: No. It’s around the launch date. It’s prior and around the launch date. So it is not several quarters. It is during that quarter normally.

And in this case, we launched these products in in in the June. So we saw the the selling effect in in in May and in June for for those because we what we do is that we obviously sell in to the dealers so they they fill their stock and then we also monitor their sale through. So in this case for the b 20 and b 30, we saw replenishment orders coming quite fast actually and we were very happy for that. So but

Marcella Klang, Analyst, Handelsbanken: And then

Anders Hiedebarg, CEO: around the month time, around around the launch.

Marcella Klang, Analyst, Handelsbanken: And then a question regarding the important LED Yes. Push that you’re doing and hesitant consumers. Do you believe that your expected customers that they are postponing purchases? Or in these challenging times, is it possible that they are downgrading to cheaper competitors, products such as Apple or Arri and so on?

Anders Hiedebarg, CEO: First of all, downgrading to cheaper products, that is always happening, of course, and people are shopping and and and trying to take smart decisions. So you you should never neglect that. So, of course, that that this is happening by professional purchases. But we also see that that we see the trend as I presented in the into my last slide that the the flash market is not increasing. So we see that large studios is investing in LED also.

And and that is, of course, one of the reasons why we are entering this market, the LED product market. So we we expect and we already see we have we ordered have orders, preorders for for our product launches. So so we are very happy. We think that that we will be able to take the small premium position in that market and build from that position going forward. But the more that that addressable market is also, bear in mind, much larger than our current addressable market.

So there is more room to maneuver, and there are more segments both in price and products in in that market. So we’ll state an answer to your question, Marcyna.

Marcella Klang, Analyst, Handelsbanken: Thank you so much. This were all questions from me. I also wish you a very good summary. Thank you.

Anders Hiedebarg, CEO: Thank you.

Moderator: There are no more phone questions at this time. So now it’s time for the written questions.

Amanda Ostrom, Head of Investor Relations: I have not received any written questions here today. So I just wanted to thank you all for joining us today and also give a gentle reminder about our third quarter report, which is published on the October 23. Thank you.

Linus Marmstadt, Acting CFO: Thank you. Thank you.

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